Zynga Inc (ZNGA) Q1 Earnings Preview: Everything You Need To Know

Zynga Inc (ZNGA) Q1 Earnings Preview: Everything You Need To Know

Zynga Inc (NASDAQ:ZNGA) is scheduled to report its Q1 2013 (ending March) results after market close on Wednesday, April 24, and the company will hold a conference call at 2pm PT.

Zynga Inc (ZNGA) Q1 Earnings Preview: Everything You Need To Know

Analysts expect Zynga Inc (NASDAQ:ZNGA)’s revenue of $265 million versus consensus of $210 million and guidance of $255 – 265 million, bookings of $210 million versus guidance of $200 – 210 million, adjusted EBITDA of $(1.3) million versus guidance of $(10) – 0 million, and non- GAAP EPS of $(0.04) versus consensus of $(0.04) and guidance of $(0.05) – (0.04). On the Q4 conference call, Zynga’s management attributed the sequential decline in bookings (20 – 23%) expected in Q1 to a light release slate. According to AppData, the MAU decline was well below this level, and the analysts at Wedbush remain confident that Zynga Inc (NASDAQ:ZNGA) can stem declines in unique payers. Also, the firm expect the emphasis on cost control to continue. In addition, Zynga Inc (NASDAQ:ZNGA) has $188 million left in its share repurchase program.

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Zynga not expected to provide additional FY 2013 guidance.

It is targeting an adjusted EBITDA margin of 0 – 10%. Analysts do not expect additional color due to the volatility in the popularity and monetization of many Zynga Inc (NASDAQ:ZNGA) games including its most high-profile releases, coupled with the recent introduction of real money gaming. In addition, the company will seek to avoid underperforming expectations as many investors are once again warming to the stock after misses in the past.

Earlier this month, Zynga Inc (NASDAQ:ZNGA) released ZyngaPlusPoker and ZyngaPlusCasino in the U.K. with partner bwin.party, with additional launches expected throughout 2013. Zynga will have to overcome a number of competitors in the U.K., and even if the games prove to be popular with consumers, Zynga Inc (NASDAQ:ZNGA) will likely have to share a significant portion of its profits with bwin.party, in analysts’ view.

The research firm expect online game revenue to stabilize while mobile and advertising revenue increase markedly. In addition,  Wedbush expect Zynga Inc (NASDAQ:ZNGA) to remain committed to cost control, resulting in positive earnings for the year.

Wedbush’s price target reflects 2x cash (including marketable securities) and real estate of $2/share. Analysts at the firm believe the flexibility inherent in Zynga’s business model makes a return to profitability far more likely than a period of sustained losses.

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